The opinion of the court was delivered by: BONSAL
Plaintiffs Demsey & Associates, Inc. (Demsey), of Cleveland, Ohio, and Interstate Steel Company (Interstate), of Chicago, Illinois, instituted this action for cargo damage against the S.S. SEA STAR, her owner Atlantic Marine Enterprises, Inc. (Atlantic), the time charterer World Bulk Shipping, Ltd. (World Bulk), and the stevedore Pittston Stevedoring Corp. (Pittston) which discharged Interstate's cargo at Chicago. Jordan International Co. (Jordan), the voyage charterer, was impleaded as a defendant. The issue of liability was tried before the court without a jury, the issue of damages being reserved for later proceedings.
Plaintiff Demsey ordered 463 secondary hot rolled steel coils from The Eastern Steel & Metal Co. by purchase order dated July 3, 1963 and invoice dated August 15, 1963. Plaintiff Interstate ordered 691 prime hot rolled steel coils from The Eastern Steel & Metal Co. by purchase order dated May 2, 1963 and invoice dated August 15, 1963. (Eastern filled the order with 691 secondary steel coils, but this issue is not here involved.) The plaintiffs opened irrevocable letters of credit payable on presentation of clean-on-board bills of lading, and the coils were obtained by Eastern from Altos Hornos de Mexico, S.A., of Monclova, Mexico.
The coils consigned to plaintiffs were loaded aboard the SEA STAR at Tampico, Mexico, each coil made of secondary steel, weighing approximately 4 to 5 tons. The coils were in a rusted condition at the time of loading. The coils were properly and adequately strapped for the ocean voyage from Tampico to Great Lakes ports, each coil being strapped by two 2-inch bands around the circumference and four passing through the eye at quarter points in the circumference. The outer laps of each coil were tack-welded to the next inside lap.
The time charter of the SEA STAR between Atlantic as owner and World Bulk as charterer provided that upon the vessel's delivery at Tampico she was to be "tight, staunch, strong and in every way fitted for the service * * *", and Clause 8 provided:
"The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to load, stow, and trim the cargo at their expense under the supervision of the Captain who is to sign Bills of Lading for cargo as presented, in conformity with Mate's or Tally Clerk's receipts."
World Bulk was to provide the necessary dunnage and shifting boards, and the time charter was subject to the "U.S.A. Clause Paramount." The voyage charter between World Bulk and Jordan provided that the cargo was "to be loaded, stowed and discharged free of risk and expense to the vessel," and that the "U.S. Clause Paramount" and New York Produce Exchange Arbitration Clause" were to incorporated therein.
On August 16, 1963, prior to the completion of the loading of the coils, three bills of lading were issued in Tampico by Representaciones Maritimas, S.A. (Representaciones), World Bulk's agents -- two with respect to the steel coils being shipped to Interstate, Chicago, and one with respect to the coils being shipped to Demsey, Cleveland. Each bill of lading was signed by Representaciones "for the master," and stated that the coils were shipped at Tampico "in apparent good order and condition" and were "received on board -- clean on board." Representaciones issued the three bills of lading at the request of Jordan which had been advised that the loading had not been completed and which knew that the coils were in a rusted condition. Neither World Bulk nor its agents, Representaciones, was authorized to sign the bills of lading for or on the master's behalf.
On August 19, 1963, Jordan, with the knowledge of Atlantic, issued a letter of indemnity to World Bulk agreeing to indemnify World Bulk for any loss it might suffer by reason of the fact that the coils were rusted.
The loading was done by the ship's gear, and prior to departure, the master signed a clean mate's receipt covering the coils.
The stowage plan prepared by Representaciones shows that the coils consigned to Interstate (Chicago) were stowed in Nos. 1-5 lower holds, and the coils consigned to Demsey (Cleveland) were stowed in Nos. 1-5 lower holds, above the Interstate coils, and in Nos. 1, 2, 4, 5 'tween deck. The 'tween deck hatch boards were old and dry and the chief officer instructed the stevedores not to stow any coils over the hatch boards.
The SEA STAR sailed from Tampico on August 21, 1963 and arrived in Cleveland, Ohio, on September 27, 1963 after having called at Charleston, South Carolina for approximately four days to take on fuel, and at Montreal for approximately ten days to be equipped with certain fittings. (These calls did not constitute unreasonable deviations, see Morrison & Stumberg, Cases and Materials on Admiralty, 367 (1954); Gilmore & Black, The Law of Admiralty, § 3-41 (1957); Poor, Charter Parties and Ocean Bills of Lading, § 69 (1968).)
The plaintiffs did not inspect the steel coils prior to their arrival in Cleveland and were not aware of the rusted condition of the coils at the time of loading in Tampico.
When the hatches were opened on the arrival of the vessel in Cleveland, many of the coils were found to be damaged. Prior to discharge, Ralph R. Peachman, a marine surveyor, inspected the Demsey coils at the request of the Cleveland Stevedoring Co. which had been engaged by World Bulk to discharge the Demsey coils. Peachman confirmed that the hatch boards in the 'tween decks were in poor condition. His inspection revealed that there was inadequate chocking throughout the stow, with the result that coils had shifted out of their original stow, breaking or splintering a total of 30 hatch boards, and a number of coils had lodged between the beams in the square of the hatch and one had broken through the hatch boards, dropping into the lower hold. In Nos. 1, 2 and 5 lower holds, Peachman found that Demsey coils had been overstowed and interstowed with the Chicago coils, requiring that the Chicago coils be moved in order to discharge the Demsey coils. In Nos. 4 and 5 lower holds, Peachman found that the coils had been dumped in without regard for uniformity. By reason of the poor condition of the 'tween deck hatch boards and the improper stowage, Peachman found substantial damage to the Demsey coils such as crimping, bending, telescoping, and the breaking or loosening of the bands in both the 'tween deck and the lower hold.
The Peachman survey found that all of the Demsey coils were rusted, for which no claim is made by Demsey. However, Peachman also found serrations or sling marks in the eyes of some of the coils and was of the opinion that these were caused by handling during the loading of the vessel or prior thereto.
Following Peachman's inspection, the Demsey coils were discharged by the stevedore and loaded on trucks for delivery to a storage warehouse. At the warehouse, the coils were jointly surveyed by William G. Davies, Jr., a marine surveyor representing the cargo underwriters, and ...